The heavy water reactor at Arak, which Iran hopes to bring on line by the end of 2014. Photograph: Hamid Foroutan/AFP/Getty Images

While the presidential election campaign gets underway in Iran, the International Atomic Energy Agency has produced its latest quaterly report on the country's nuclear programme, which does so much to shape the backdrop to Iranian politics - and not in a good way.

The IAEA Safeguards Report has been leaked, as tradition dictates, and is available online here courtesy of the Institute for Science and International Security (ISIS).

The most important single indicator that tells us how close to a conflict we might be, shows there is still breathing room for talks when the elections are over. The report says that Iran's stockpile of 20% enriched (a half-way house between low enriched uranium for nuclear power stations and weapons grade stuff for bombs) is now 182kg, which is up 15kg from the last report three months ago but still well below the 240-250kg that would be enough to make an initial warhead, if the Iranians decided to go for making nuclear weapons. That threshhold is where Binyamin Netanyahu lay down Israel red lines before the UN General Assembly last September.

The Iranians have made a total of 324kg of this medium enriched uranium, but continues to process much of what it makes into oxide fuel, which is less of a proliferation concern, so it is not counted as being part of the critical stockpile.

The rest of the report, however, makes clear that there is plenty more to worry about. It goes into particular detail about the heavy water reactor under construction in Arak. That has not been in the spotlight much until now because the uranium enrichment programme has been seen as a far more direct route to making a nuclear weapon.

It still is. The Arak heavy water reactor, when operational, could produce plutonium if the spent uranium fuel was reprocessed, and plutonium can be used to make smaller, even more powerful nuclear warheads than weapons-grade uranium. To make it, however, Iran would need to build a reprocessing plant and there is so far no sign of that. But the reactor is getting closer to completion. A huge reactor vessel has arrived at the site but has yet to be installed, but a lot of other things have been put in place.

[T]he following major components have been installed at the IR-40 Reactor: the containment overhead crane; the moderator and primary coolant heat exchangers, circuit piping and purification systems; the moderator storage tanks; and the pressurizer for the reactor cooling system.

The Iranians predict the reactor, which they say is for research purposes, will be operational by the third quarter of 2014. Most observers don't think they will make that deadline. There is still a lot of stuff to be built, like the control room, the mechanism for refuelling the reactor and the cooling pumps. Still, by next year, if work proceeds at the current pace it is easy to see Arak become an serious source of international friction.

The report also notes that IAEA inspectors have not been allowed to visit the production plant - which will supply the deuterium oxide (heavy water) for the reactor to function - since August 2011, and since then the agency has had to rely on satellite images.

The IAEA goes into more detail that usual about its disagreement with Iran over when the government is supposed to tell the agency about new nuclear facilities. Under the original IAEA rules, a country only had to tell the agency about a new plant six months before nuclear material was due to be delivered for the first time. This was called Code 3.1. In the 1990's a modified Code 3.1 was introduced which said a new facility had to be reported as soon as the decision to built it had been taken.

In 2003, Iran agreed to the new Code 3.1, but in 2007, it suspended its implementation, and now refuses to abide by it. You can read more about it here.

This is important because of the suspicion that Iran could be building secret facilities. If tomorrow it was discovered that Iran had built a new underground enrichment plant like the one revealed at Fordow in 2009, Tehran would argue it was completely in its rights as it was not bound by the new Code 3.1. Thus the refusal to agree to the new code increases suspicion that there might be a parallel covert nuclear programme under construction. This uncertainty is heightened by the fact that various Iranian officials have announced in recent months that Iran is building four new research reactors, ten new enrichment plants and 16 new nuclear power stations, without saying where any of these facilities are located.

All this, along with a complete lack of progress on agreeing guidelines for the IAEA's investigation into Iran's alleged past weaponisation work, adds up to a fairly negative report. It's not bad enough to get the war drums beating again, but sufficiently worrying to underline the importance of reaching some kind of compromise on the Iranian programme soon after the election is over.